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Unformatted text preview: a. b. c. d. e. Question: If the dividend is expected to grow at a constant rate, g, what is g? Assume that you plan to buy a share of XYZ stock today and to hold it for 2 years. Your expectations are that you will not receiv dividend at the end of Year 1, but you will receive a dividend of $9.25 at the end of Year 2. In addition, you expect to sell the sto for $150 at the end of Year 2. If your expected rate of return is 16 percent, how much should you be willing to pay for this stock today? A share of common stock has just paid a dividend of $2. If the expected long-run growth rate for this stock is 5%, an if investors required rate of return is 10.5%, what is the stock price? ) Albright Motors is expected to pay a year-end dividend of $3.00 a share (D1 = $3.00). The stock currently sells for $30 a share. The required (and expected) rate of return on the stock is 16 percent. You were hired as a consultant to Kroncke Company, whose target capital structure is 40% debt, 10% preferred, and 50% common equity. The after-tax cost of debt is 6%, the cost of preferred is 7.5%, and the cost of retained earnings 13.25%. the firm will not be issuing any new stock. What is its WACC? (Points: 10) 9.48% 9.78% 10.07% 10.37% 10.68% 10. (TCO B, F) Sewart Associates is considering a project that has the following cash flow data. What is the project's payback?...
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- Spring '09
- Net Present Value, target capital structure